Sears, Disney Sign Agreement

Retailer`s Line To Feature Characters

Sears, Roebuck & Co. will develop and sell products featuring characters such as Mickey Mouse and Winnie the Pooh in an agreement with Walt Disney Co., the nation`s largest retailer said Wednesday.

The 10-year agreement also includes a special Disney line of merchandise that Sears will develop to sell exclusively in its 832 stores nationwide, Sears said.

Neither Disney nor Sears executives would put a price tag on the deal. But Disney President Frank Wells called the agreement ``good for both sides,`` adding that ``there are a lot of nonfinancial aspects to this as well.``

The move will accelerate Sears` push into specialty retailing, which is expected to provide more growth opportunities and higher profits than its traditional general merchandise operation, said Walter Loeb, chief retail analyst for Morgan Stanley & Co. in New York.

``They`re really bent on going into special retailing in many areas,``

said Loeb. ``This is a very well-conceived plan.``

Specialty boutiques within the stores will be called ``Magic Kingdom,``

Sears said.

Joseph Batogowski, president of Sears Merchandise Group, said the Disney products will include apparel, home fashions, video equipment and toys. They will include not only children`s products but also products for preteens, he said.

One of the first new products under the agreement will be a train set, possibly carrying the Mickey Mouse logo.

Michael Bozic, chairman of Sears Merchandise Group, called the alliance

``a natural development`` for the two companies.

``In today`s competitive retail environment, exclusivity is important because it creates another reason for customers to come to Sears,`` said Batogowski.

``I believe we have the makings of a perfect partnership,`` said Disney Chairman Michael Eisner. ``America`s premier retail company and America`s premier entertainment company are merging their strengths for the benefit of both.``

The Disney tie-in, which began in 1965 with a licensing agreement to market Winnie the Pooh children`s clothing and accessories, follows a similar agreement Sears and McDonald`s Corp.

Under that agreement, announced earlier this year, Sears is selling McKids clothing and reportedly is considering expanding into McDads and McMoms lines. Sales of the fall line, which one analyst estimated could push the retailer`s profits up as much as 20 percent this year, began last summer.

Sales of McKids and Winnie the Pooh lines are estimated at nearly $200 million this year, industry sources said. Bozic said the Winnie-the-Pooh products ``have produced more than $1 billion worth of business in the last 10 years.``

The new Disney tie-in will strengthen the McKids line, said Batogowski. The agreement ``allows each company to target each other`s customers.``

Speciality stores are being tested by Disney, with three in operation. More stores will be added and many will carry merchandise developed by Sears. Disney`s merchandise programs have sales of ``several hundred million dollars a year,`` Wells said.

Sears began selling Walt Disney merchandise in its catalogues in 1931, but didn`t produce the goods.

The agreement with Disney gives Sears exclusive rights to develop products using classic Disney characters from films that will be re-released and from new animated feature-film characters.

Sears will not have exclusive rights to Mickey Mouse, Donald Duck and Goofy. Licensing agreements with other retailers ``will be allowed to expire,`` said Wells. Sears will give only ``promotional support`` for ``at least two`` animated Disney films a year.

Sears will also sponsor a major attraction at the new Disney-MGM Studios being developed at Walt Disney World Resort in Florida. The studio is expected to open in the spring of 1989.